Investment Themes, Valuations and Big Ideas

A -post collection

Japan is still a good opportunity for patient investors

Profit margins in Japan are quietly surging. This is a phenomenon that we certainly have been seeing in the US for years, and incrementally in Europe. But, the rate of change in Japan is in fact, far better than the other two. Better yet, as the Wall Street Journal points out, with Net Margins at just about 6%, they have room for further improvement as they still lag these other developed markets. Since Abenomics has begun, the productivity of working age population 25-54 year old has risen sharply, from 80% to more than 85%. But the biggest evidence is in the change in real GDP per working age adult. After years of lagging the US, it is now accelerating faster than the US in recent years.

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S&P 500 Sales & Earnings update

As Q3 Earnings season winds down, we provide a quick update on how the various sectors fared on Sales and EPS results. 91% of S&P 500 companies have already reported, so at this point we have a pretty good indication of how things are going to settle out. Overall, the quarter was pretty impressive with 55% of companies beating Sales estimates and 76% of companies beating Earnings estimates. The standouts on both Sales and Earnings were Technology and Financials, with 91% of Tech companies beating Earnings estimates and 84% of Financials beating Earnings estimates. The laggards were Telecom Services and Materials on both Sales and Earnings. See below a table which ranks the sectors from best to worst on both Sales (left) and Earnings

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